Milk producers support changes in program

The National Milk Producers Federation has made a move that a Weld County member of its board of directors said will provide some long-lasting stabilization to the dairy industry and prevent a rapid drop in prices like the industry suffered in 2009.

Les Hardesty, who has dairy operations northwest of Greeley and near Windsor, said the board voted earlier this month to support a series of major reforms in the Federal Milk Marketing Order program that was authorized by the Agricultural Marketing Agreement Act of 1937. There are different orders for different parts of the country. Originally designed to promote the orderly marketing of milk, the orders have been amended over the years through a federal hearing process.

The changes will be part of the federation’s Foundation for the Future, which it has been working on for the past 18 months. Perhaps the biggest change is in the way a dairy farmer is paid for milk.

In the past, four formulas were used. They will be replaced with a competitive price on two formulas.

Hardesty said in the past, farmers were paid for formula 1, fluid or “the milk you drink”; formula 2, “the milk you eat with a spoon like cottage cheese”; formula 3, “which is cheese”; and the final formula, powdered milk.

That is being changed to incorporate two classes of milk – fluid, or drinking milk, and manufacturing, which combines the former formulas 2-4.

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The price for fluid milk, Hardesty said, will be based on a competitive pay plan that uses the prices paid by milk plants that process more than 250,000 pounds of milk per day.

Changes in the government support program are also designed to provide the industry with more stability.

“It’s good for the industry, it’s good for Colorado dairy farmers and, in the long run, I think prices we get will be enhanced. And it’s a program that will be of no additional cost to taxpayers,” Hardesty said. Just as important, he added, it will lead to a more efficient industry and reduce the volatility of milk pricing.

The changes were developed by a committee of dairy producers nationwide. The changes to the federal order reforms will be put into legislative form and submitted to Congress to review as part of the overall Foundation for the Future package, according to a news release from the National Milk Producers Federation.

The development of the foundation came after the crash of the industry, which followed the worldwide recession. Locally, the price farmers received for their milk dipped to $10 per 100 pounds or less in 2009; a break-even price

is considered to be $14-$15 per 100 pounds. Adding to the problem was that a little more than

10 percent of the nation’s milk production was exported before the crash and that declined by 5 percent to 6 percent. That resulted in more milk on the already surplus U.S. supply.

Exports have increased in the past year, however, and the outlook for the state’s dairy industry is brighter, but not without some concerns, as well, said Bill Wailes, head of the animal sciences department at Colorado State University, who served for several years as the extension dairy specialist.

“There’s a lot of hope out there right now, but there’s also apprehension,” Wailes said. Most of that apprehension comes from high input costs, particularly corn, hay and fuel.

“We are looking at seeing some of the highest prices for milk we’ve ever seen this year, but the prices of those inputs are also very high,” Wailes said. The price of milk for 2011, he said, should be in the $18-$20 per 100-pound range, and he expects it to average on the low side of that range.

But, he said, the new moves by the national milk group are “not a done deal,” adding the nation’s dairy farmers have to buy into the concept of the Foundation for the Future, and Congress has to approve the changes in milk prices being proposed. Adding to the national picture is the estimated 1 billion pounds of cheese being stored in Missouri caves, most of it owned by the federal government, that has to get into the supply chain, Wailes said.

“I applaud the effort (of the foundation), but they still have a ways to go,” he said.

The price of corn and hay, the mainstay of a dairy cow’s diet, could be at record highs by the time dairy farmers start putting in their supplies this summer and fall, Wailes pointed out.

Leprino Foods’ new cheese plant under construction in Greeley is scheduled to start production sometime in November of this year, Wailes said, which means more local milk will stay local and reduce transportation costs of dairy farmers.

As that plant cranks up production, however, more cows will be needed to meet that demand. Where those cows will come from, the additional feed that will be required for those cows, and the water to grow it are all concerns, Wailes said. In addition, more labor will be needed, and the capital to fund expansion of existing dairies or new ones coming into the region will also be a factor.

The biggest result of 2009 was the need for better risk management throughout the industry, Wailes said.

“There’s some tremendous opportunities out there and the industry understands risk management better than ever before as the result of 2009. There are some guys out there who will figure out these challenges. There always are with farmers,” Wailes said.